Washington State’s Carbon Market Under Threat: What Investors Need to Know

By Timothy Gardner

A ballot initiative to ax Washington state’s carbon market would, if passed next week, send an ominous signal to other U.S. states and Canadian regions looking to build markets aimed at cutting emissions that scientists blame for climate change.

The carbon market, formed by the state’s Climate Commitment Act (CCA), has raised more than $2 billion for programs including transit, wildfire protection, and salmon protection since its 2023 launch.

It is supported by Native American tribes and environmental groups, as well as BP, a global energy company preparing for the potential wider adoption of such markets.

Hedge fund manager Brian Heywood is leading the initiative in the Nov. 5 elections to repeal it. He blames CCA, which puts emissions limits on about 100 of the state’s largest polluters, for spiking Washington’s gasoline prices to the highest in the U.S. in mid-2023.

Heywood, the millionaire Republican and CEO of Taiyo Pacific Partners, holds rallies for the initiative at gas stations, where he gives drivers money to reduce the cost of fill-ups.

“The guys that have to drive 45 minutes a day in their 2002 Honda sedans, they’re the ones that get crushed, and no one’s standing up for them, so I am,” Heywood told Reuters.

Backers of cap-and-trade carbon markets say they can efficiently tackle carbon emissions by harnessing the power of capitalism.

In such markets, the government sets gradually falling limits on carbon pollution. Industry can meet the limits by reducing their emissions through investments in clean energy. If they reduce emissions they can sell allowances to other emitters who choose not to make the efficiency investments.

Washington’s market may eventually link to similar mechanisms in California and Quebec, which backers say would give industries a broader choice of credits.

Luke Sherman, a carbon markets analyst at the consultancy Energy Aspects, said which way Washington votes could influence decisions in states like New York, which has proposed a carbon market to meet its 2050 carbon emissions goals, and in New Jersey and Maryland where some lawmakers support carbon markets.

It could also help persuade California and northeastern states in the Regional Greenhouse Gas Initiative to either broaden existing carbon markets to more industries or narrow them.

“How ambitious they want to be could certainly be influenced by their perception of voter support or rejection of carbon pricing in Washington,” Sherman said.

Analysis:

The potential repeal of Washington state’s carbon market could have far-reaching implications for climate change policies in the U.S. and beyond. Investors should keep an eye on the outcome of the Nov. 5 elections, as it could impact the future of carbon markets and emissions regulations. Additionally, the decision could affect industries and consumers in Washington state, with potential consequences for transportation infrastructure projects and fuel prices.

Overall, the fate of Washington’s carbon market is a critical issue with implications for both the environment and the economy. Stay informed and watch how this situation unfolds to make informed investment decisions.

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